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Anthem Sports, LLC v. Under Weather, LLC

United States District Court, D. Connecticut

March 6, 2018

ANTHEM SPORTS, LLC Plaintiffs,
v.
UNDER THE WEATHER, LLC Defendants.

          RULING ON MOTION TO DISMISS

          Michael P. Shea, U.S.D.J.

         Plaintiffs Anthem Sports, LLC (“Anthem”), and Griffin Global Products, LLC, bring this suit against Under the Weather, LLC (“UTW”), and Eric Pescovitz, its principal, for various intellectual property and other claims arising from the marketing and sale of “sportspods, ” i.e., small tents for viewing outdoor sporting events during inclement weather. The plaintiffs set out eight counts in their amended complaint: (i) a request for a declaratory judgment of non-infringement with regard to various patents owned by UTW (count one); (ii) a request for a declaratory judgment of invalidity with respect to various patents owned by UTW (count two); (iii) a request for a declaratory judgment of non-infringement and invalidity with respect to a trademark asserted by UTW (count three); (iv) various violations of the Lanham Act (count four); (v) common law trademark infringement (count five); (vi) tortious interference with business expectancies (count six); (vii) violation of the Connecticut Unfair Trade Practices Act (“CUTPA”) (count seven); and (viii) common law unfair competition (count eight). The defendants move to dismiss all of the plaintiffs' counts save for the third. (ECF No. 41-1 at 2). For the following reasons, the defendants' motion is granted in part and denied in part.

         I. Factual Allegations

         The plaintiffs make the following factual allegations in their amended complaint, which I assume to be true.

         Anthem is “a family-owned business and premier nationwide distributor of brand name sporting goods and equipment” that “primarily does business online through its website, through company catalogs, and [through] significant advertising and marketing efforts through its social media accounts.” (ECF No. 38 at ¶ 2). UTW is an Ohio company in possession of various patents[1] (“Patents-in-Suit”) that “purport to claim certain rights in designs for personal enclosures that protect the user from weather while watching sporting events (‘UTW Personal Enclosure[s]').” (Id. at ¶¶ 4, 10). When UTW “first began selling the UTW Personal Enclosures, [it] was unable to garner significant interest in the market and struggled to make appreciable sales.” (Id. at ¶ 11). Around the fall of 2014, “Anthem became aware of the UTW Personal enclosures and approached UTW to establish an exclusive online distribution relationship.” (Id. at 12) Through “Anthem's extensive efforts in early 2015, . . . the UTW Personal Enclosures gained traction in the marketplace and became commercially successful. . . .” (Id. at ¶ 13). At this point, “UTW and Anthem entered into an agreement in Connecticut whereby Anthem would be the exclusive online distributor of UTW Personal Enclosures other than UTW, who would continue to sell UTW Personal Enclosures online.” (Id. at ¶ 14). The parties discussed forming a partnership, but these discussions dissipated after UTW declined to respond to Anthem's proposed “partnership term outline.” (Id. at ¶ 15).

         The parties' relationship collapsed shortly thereafter. UTW “raised the prices for the UTW Personal Enclosures sold to Anthem” to the point where Anthem could no longer afford to purchase and sell them. (Id. at ¶ 16). UTW then began selling the enclosures “to major sporting goods retailer DICK's Sporting Goods, [which] in turn” offered them for sale online. (Id. at ¶ 17). Anthem subsequently located a different manufacturer and “began offering all weather personal enclosure products under the trade names UnderCoverTM and SportPodTM, including SoloPodTM, Action PodTM, TeamPodTM, and BugPodTM (collectively, the ‘Anthem Pods')”; Anthem ensured that none of these products “infringe[d] any valid or enforceable claim of the Patents-in-Suit.” (Id. at ¶ 18). Subsequent to “Anthem's adoption and use of the trademark SportPodTM, ” UTW began using “the mark ‘Sportspod' to refer to multiple goods” that it offered for sale. (Id. at 19). “Anthem did not authorize UTW to use its SportPodTM mark, and the ‘SportsPod' mark is confusingly similar and likely to cause confusion, mistake, or deception as to the source of UTW's goods, and is likely to cause confusion, mistake, or deception as to whether UTW's products are associated, affiliated, or connected with or approved or sponsored by Anthem.” (Id.).

         Despite Anthem's precautions concerning the Patents-in-Suit, UTW subsequently demonstrated “that it believes [that] Anthem . . . is allegedly infringing upon UTW's rights in the Patents-in-Suit. . . .” (Id. at ¶ 22). “On or about April 7, 2017, one of UTW's principals left a voicemail for one of Anthem's principles” stating as follows:

Hey Mark, it's Rick; just got an email from Anthem with your new products. I shouldn't sound surprised, I assume that's how you work. I just [sic] letting you know, and you can tell your friend Shanghai Eversuccess as well, they will be sued as well as you, I have the patent on that design, so, and if you think I'm kidding, there will be a lawsuit for you next week. Just letting you know.

(Id. at ¶¶ 22-23). UTW has also “made threats against Anthem, its supposed supplier, and customers that the Anthem Pods allegedly infringe one or more claims of the Patents-in-Suit.” (Id. at ¶ 26). Further, UTW “recently sued another personal enclosure product supplier . . . for infringement of four of the Patents-in-Suit . . . in the Southern District of Ohio.” (Id. at ¶ 20).

         UTW has also waged a campaign against Anthem's products on Facebook.com. “On numerous occasions and without justification, [Defendant] Pescovitz, UTW, or its representatives have responded to customer comments indicating a desire to purchase Anthem Pods” on Anthem's web page on Facebook.com with the following comments: (i) that the “only place to get [Anthem Pods] is undertheweatherpod.com, ”; (ii) that the Anthem Pods “are illegal knockoffs and very poor quality, ” and that the “legal ones are only available at undertheweatherpods.com”; and (iii) that the Anthem Pods were “[Pescovitz's] idea and patent”; (iv) and that the Anthem Pods are “complete knock offs.” (Id. at ¶ 25).

         II. Legal Standard

         Under Fed.R.Civ.P. 12(b)(6), the Court must determine whether plaintiffs have alleged “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ray v. Watnick, 688 Fed.Appx. 41 (2d Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations and internal quotation marks omitted)). While the Court must “draw all reasonable inferences in favor of the non-moving party, ” Vietnam Ass'n for Victims of Agent Orange v. Dow Chem. Co., 517 F.3d 104, 115 (2d Cir. 2008), it must grant the moving party's motion if “a complaint is based solely on wholly conclusory allegations and provides no factual support for such claims. . . .” Scott v. Town of Monroe, 306 F.Supp.2d 191, 198 (D. Conn. 2004).

         III. Discussion

         A. The Patent Claims (Counts One and Two)

         The defendants make two arguments with respect to the plaintiffs' patent claims. First, they contend that there is no actual case or controversy for the purposes of the Declaratory Judgment Act with respect to four newly issued UTW patents first mentioned in the plaintiffs' operative amended complaint-the ‘023 Patent, the ‘024 Patent, the ‘025 Patent, and the '26 Patent (“new patents”). (ECF No. 41-1 at 5). Second, they aver that the plaintiffs' second count requesting a declaratory judgment of invalidity as to the Patents-in-Suit fails to set out a plausible claim. (Id. at 7-8). I address each of these contentions in turn.

         1. The New Patents

         The Declaratory Judgment Act provides, in relevant part, as follows:

In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.

28 U.S.C. § 2201(a). With respect to patents, the Declaratory Judgment Act (“the Act”) “can prevent patent owners from brandishing a Damoclean threat with a sheathed sword” by enabling a competitor to secure legal certainty when the patent owner informs prospective customers that the competitor is infringing. Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 878 (Fed. Cir. 2008) (quoting Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 (Fed. Cir. 1988), overruled on other grounds by MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). Prior to the Act, “competitors victimized by that tactic were rendered helpless and immobile so long as the patent owner refused to grasp the nettle and sue.” Arrowhead Indus. Water, Inc., 846 F.2d at 735. The Act provides these competitors with the ability to “clear the air by suing for a judgment that would settle the conflict of interests” once and for all. Id.

         The remedy of the Act is not available in all budding disputes. Article III of the Constitution restricts the scope of the Act to instances involving actual “[c]ases” or “[c]ontroversies”, as opposed to “difference[s] or dispute[s] of a hypothetical or abstract character.” Mathews Intern. Corp. v. Biosafe Engineering, LLC, 695 F.3d 1322, 1328 (Fed. Cir. 2012) (internal quotation marks omitted). There is no “facile, all-purpose standard to police the line between declaratory judgment actions which satisfy the case or controversy requirement and those that do not.” Cat Tech LLC, 528 F.3d at 879. Rather, “the analysis must be calibrated to the particular facts of each case, with the fundamental inquiry being ‘whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties, having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'” Id. (quoting MedImmune, 549 U.S. at 127 (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941))).

         The Supreme Court's decision in MedImmune “'lowered the threshold' for establishing the existence of an actual case or controversy in intellectual property-related declaratory judgment cases.” Gelmart Indus., Inc. v. Everready Battery Co., 120 F.Supp.3d 327, 331 (S.D.N.Y. 2014) (quoting AARP v. 200 Kelsey Assocs., LLC, No. 06 Civ. 81, 2009 WL 47499, at *6 (S.D.N.Y. 2009)). Prior to MedImmune, “the test for ‘actual case or controversy' had two prongs: ‘(1) has the defendant's conduct created a real and reasonable apprehension of liability on the part of the plaintiff, and (2) has the plaintiff engaged in a course of conduct which has brought it into adversarial conflict with the defendant.'” Windstream Servs., LLC v. BMG Rights Mgmt. (US) LLC, No. 16CIV5015KMWRLE, 2017 WL 1386357, at *4 (S.D.N.Y. 2017) (quoting Starter Corp. v. Converse, Inc., 84 F.3d 592, 595 (2d Cir. 1996)). After MedImmune, the inquiry into whether a case or controversy exists in intellectual property cases turns on “whether the adversity of legal interests that exists between the parties is real and substantial and admi[ts] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” Nike, Inc. v. Already, LLC, 663 F.3d 89, 95-96 (2d Cir. 2011) (internal quotation marks omitted). In addition, “the threat of future litigation remains relevant in determining whether an actual controversy exists.” Id. Since “[d]eclaratory judgment actions are particularly useful in resolving trademark disputes . . . the finding of an actual controversy should be determined with some liberality.” Gelmart, 120 F.Supp.3d at 331 (quoting Starter Corp., 84 F.3d at 596)).

         Even when an actual controversy exists, however, a district court's decision to exercise jurisdiction over a declaratory judgment action is discretionary. See Matthews Intern. Corp., 695 F.3d at 1328 n. 3 (“[E]ven if a case or controversy exists, the trial court has significant discretion in determining whether or not to exercise declaratory judgment jurisdiction.”). The Second Circuit has set out a five factor test to guide courts in exercising this discretion:

(i) whether the judgment will serve a useful purpose in clarifying or settling the legal issues involved; (ii) whether a judgment would finalize the controversy and offer relief from uncertainty; (iii) whether the proposed remedy is being used merely for procedural fencing or a race to res judicata; (iv) whether the use of a declaratory judgment would increase friction between sovereign legal systems or improperly encroach on the domain of a state or foreign court; and (v) whether there is a better or more effective remedy.

The New York Times Co. v. Gonzalez, 459 F.3d 160, 167 (2d Cir. 2006) (internal quotation marks omitted).

         The defendants contend that the plaintiffs have failed to demonstrate the existence of a case or controversy with respect to the new patents given that the events asserted in the plaintiffs' complaint took place several months before their issue. (ECF No. 41-1 at 6). But the operative inquiry is whether the newly added patents are likely to fall within the same case or controversy that the defendants concede exists with respect to the other Patents-in-Suit, (see ECF No. 47 at 3). According to the plaintiffs' complaint, all of the Patents-in-Suit pertain to designs for “personal enclosures that protect the user from weather while watching sporting events.” (ECF No. 38 at ¶ 10). Further, a principal of UTW has threatened to sue Anthem over, at the very least, more than one of the Patents-in-Suit. (Id. at ¶ 23). It is also apparent from the attachments to the complaint that the dispute between the parties involves the right to market and sell a single type of product-small tents or pods designed for viewing sporting events. The newly issued patents pertain to the same type of product. Thus, given the general threats of litigation defendants have allegedly already made, the plaintiffs have a justifiable concern that the defendants could bring suit for infringement of the new patents, along with the other Patents-in-Suit. This is enough to create an actual case or controversy concerning the new patents at this stage of the litigation, and it also shows that a declaratory judgment would offer relief from uncertainty and serve a useful purpose in clarifying the legal issues involved. See Banff, Ltd. v. Federated Dept. Stores, Inc., 841 F.2d 486, 493 (2d Cir. 1988) (party's intention and ability to sell goods potentially violative of mark created justiciable controversy); contrast Matthews Intern. Corp., 695 F.3d at 1328 (no justiciable controversy where plaintiff did not present evidence that it could potentially infringe defendant's patents).

         The case of In re Dr. Reddy's Labs., Ltd., No. 01 CIV. 10102 (LAP), 2002 WL 31059289 (S.D.N.Y. 2002), is instructive on this point. In Dr. Reddy's Labs, a party sought a declaratory judgment of non-infringement with respect to several patents, all of which dealt with the drug omeprazole. Id. at *3. The plaintiff grounded his claim on several Wall Street Journal articles suggesting that the defendant would bring potential infringement suits against “generic omeprazole manufacturers.” Id. at *7. While the Dr. Reddy's court acknowledged that “two of the three patents upon which [the plaintiff sought] a declaratory judgment had not yet been issued” at the time of the publication of the articles, it nonetheless concluded that a case or controversy existed with respect to the newly issued patents given the defendant's broad threat against omeprazole manufacturers. Id. at *8-9. Here, as in ...


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